Veeva Systems Inc. (VEEV) Earnings Call Transcript & Summary

Hi, and thank you, everyone, for joining us on our webcast today for our 2021 Virtual Analyst and Investor Day. I'm Ato Garrett, Head of Investor Relations here at Veeva. Feel free to contact me if you have any questions during the course of today's presentation or at any point in the future. A couple of quick notes before we begin. Today, we have a series of presentations over about the next 90 minutes or so. First, you'll hear from Peter Gassner, our Founder and CEO. Then you'll get an update on our commercial business from Paul Shawah and some highlights of our R&D business from Jim Reilly. And we're happy to share our customer discussion with Alessandro De Luca of Merck. After that, we have the CFO, Brent Bowman, who'll provide a financial update. And then we'll return back to Peter for some closing remarks. At the end of the presentations, we'll have time for Q&A. If you have any questions during today's presentation, feel free to submit them during the -- or using the webcast widget or you can e-mail them to [email protected]. And before we get started, I'd like to read a quick disclaimer. During the course of today's presentations, we will make forward-looking statements, including statements regarding trends, our strategies and the anticipated performance of our business. These forward-looking statements are based on management's current views and expectations and are subject to various risks and uncertainties. Actual results may differ materially. Please refer to the risk factors included in our most recent filing on Form 10-Q, which is available on the company's website at www.veeva.com under the Investors section and on the SEC website at sec.gov. Forward-looking statements made during today's presentation are being made as of today, October 28, 2021. If the presentations are replayed or viewed after today, the information presented may not contain current or accurate information. Veeva disclaims any obligation to update or revise any forward-looking statements. In the presentation, we will also discuss certain non-GAAP metrics that we believe aid in the understanding of our financial results. A reconciliation to comparable GAAP metrics can be found in the appendix of today's presentation, which will be posted on our website. And with that, I'll turn it over to Peter.

Thanks, Ato, and thanks, everyone, for joining today. Today, we want to help you understand Veeva better, where we are now, our future plans and the overall industry cloud opportunity. Understanding the U.S. starts with our vision and values. I presented this slide many times every quarter, including at the start of every Veeva Summit, Board meeting and all company meeting. Our vision is to build the industry cloud for life sciences and make the entire industry more efficient and effective. We do this through cloud software, data and high-value services. Our values guide the decisions we make, big decisions like our product strategy and smaller operational decisions as well. Do the right thing is about integrity and actively making the choice to do the right thing every day. Customer success means our products and people have to deliver for the customers and for the industry overall. It's about helping the people in the industry, the companies in the industry and making the whole industry more effective. For employee success, we want Veeva to be a positive place for our team, a place where they can do their best work. And speed reminds us to move quickly and get things done right the first time, even as we get bigger. In February, we became the first public company to convert to a public benefit corporation or PBC. Let me take a minute to explain why we became a PBC and what it means for Veeva and the industry. We've always operated with a balanced and long-term view. Veeva has to work for customers, employees and shareholders. We have to balance those interests. As a public benefit corporation, that philosophy is part of our legal duty at the Board level. Changing to a PBC was not about changing Veeva, it was about protecting the way Veeva operates for the decades to come. And life as a PBC is going well. We're seeing the benefits we anticipated and some unexpected ones as well. It's helping us attract great people that are aligned to our values. It's making it easier for companies, especially large companies, to go all in with Veeva. And becoming a PBC is becoming a source of new ideas that might bear fruit over the long term. We're also hearing from other companies interested in the PBC structure. We're very happy with our new status as a PBC and that we took a strong lead in this important area. Our long-term thinking is also about setting clear goals against our vision, staying focused and consistently executing. In 2015, we set a goal to cross $1 billion in 2020, and we reached it a year early. In 2019, we set our next goal of $3 billion in 2025, and we are tracking ahead of our plan. Now we're thinking about our 2030 goals. Drilling into our 2025 goal. First is to reach $3 billion in revenue with strong growth and profitability. At that point, we expect we'll be about 10,000 people to roughly double head count from where we are today. Room to grow is key. That means having strong early product pipeline when we get to 2025. I've been in high-growth enterprise software in my entire career. And I know that deciding what products to build, having discipline about what not to do, having a vision for how these things all fit together and then executing with product excellence, that's what creates growth and market leadership. We aim to pick clear and correct markets. After that, execution matters most. We always need vision and execution. And Still Veeva means having a consistent vision and values and being agile. Companies can lose the ability to adapt as they grow, and we don't want that to happen to Veeva. We have the right strategy, markets and products in place to achieve our 2025 goals, and we're executing well against those plans. Veeva operates in 3 main customer segments today: Pharma and Biotech; MedTech; and Consumer Goods and Chemicals or CP&C. The bulk of our business and our largest market opportunity is in Pharma and Biotech. This is not uniform. It includes many subsegments. We have global pharma companies as well as local pharma companies that operate only in Asia and Lat Am, generics companies, contract manufacturers and contract research organizations or CROs. Each of these subsegments has nuance, and we embrace that. MedTech is a specific part of life sciences and is a growing segment for Veeva. We started focusing on MedTech a few years ago with a dedicated team, and it's growing nicely. Development Cloud is our product offering in MedTech, and we've added many MedTech-specific features into Development Cloud over the past few years. In CP&C, we have specific bolt applications in the quality and regulatory area, and that segment is also growing nicely. Our Industry Cloud for life sciences includes Veeva Development Cloud for R&D and Commercial Cloud for commercial and medical. We've become an increasingly strategic partner to life sciences by building excellent products for their most important areas, running to complexity to solve the hard problems and making it all fit together. This is hard to replicate because it's hard to do. If we combine that with customer success, humility and continued innovation, that creates a very high barrier to entry. This is what building an industry cloud is about. It's a win for Veeva, our customers and the industry. Jim and Paul will talk about R&D and commercial in a moment, but bigger picture, I'd like to touch briefly on 2 of the newer areas that build on our strong foundation in R&D and commercial, the Veeva Digital Trials Platform and Veeva Data Cloud. Both are just starting and can be very significant for Veeva in terms of long-term growth and could be transformative for the industry. Both are great examples of the power of industry cloud and how we can help advance the industry overall. The Digital Trials Platform connects pharma companies, clinical research sites and patients. Enabling this type of business network is very powerful and very rare in enterprise software. And in the case of Data Cloud, having the best industry-specific data at the country level and the best software, that can be a game changer. In 2015, we set a long-term goal to be essential and appreciated by the industry. It seemed pretty aspirational back then. We were only selling CRM, and Paul was just starting. We were far from essential. Now we have the building blocks to get there. The industry is big, more than $2 trillion and growing. It's still very early days in our vision to use technology and data to move the industry forward in innovative ways. It's a big goal. And if we achieve it, we will deliver significant value. So how are we doing that? We need many products to cover the main industry-specific processes. All need to be excellent on their own and all work together, and we have a track record of doing just that. Here are a few examples. Starting with CRM in 2007, then moving to Vault in 2011, both are now proven and trusted by the industry. Link, which started in 2016, is hitting its stride now. Data Cloud and Digital Trials, they're newer. They started in the last 2 years. So there's no real proof yet, but I'm confident we're on the right track. Getting here is the result of our team and our operating model, which we refined over the years. We have over 5,000 people that know how to work together with a common multiproduct operating model. Some products, they're in the innovation stage, and some are in the execution stage and some are in the leadership stage. And they're treated differently in different stages. It starts with product excellence, attracting the best product people and creating the best products, being close to customers, deeply understanding the industry and having the right vision for what to develop. And then putting the right processes in place, things like how does product management work with engineering and strategy, how to measure and course correct, what kind of risks should we take? We also want to do that globally so that our products are excellent all around the globe, not just in the U.S. Customer success drives many things, including hiring plans, compensation plans and product plans. It's at the heart of all of our major decisions. Hiring employee success have always been important but are probably even more important now. We have an innovative hiring and onboarding process that we continue to evolve and improve. And then autonomy, this is critical in a multiproduct company. Autonomy at the group level brings innovation and energy. And it also brings inefficiency, which we are okay with. We are a customer success company and an innovation company at our core. As I look forward, there are multiple drivers of long-term growth. First is just the market we're in. We're trying to automate a $2 trillion industry through cloud software, data and services. It's still very early, and we're finding new ways to add value. The second is customer success. This fuels our growth and helps with new products. Customers trust Veeva because we've delivered for them and they help us evolve. And third is our operating model that allows us to retain our speed and innovation even as we grow. It's an exciting time to be at Veeva. With that, I'll hand it over to Paul to talk about Commercial Cloud.

Hi, everyone, I'm Paul Shawah, and I'm responsible for Commercial Cloud strategy at Veeva. I get to give you an update on our commercial business. I'm going to start with a short overview of what's happening in the industry because it's really important to understand the context which is driving our strategy and how we're helping to enable our customers. First is this move to specialty medicines. We've seen this play out over the last couple of years, but it's certainly a trend that's going to continue well into the next several years or at least 2025, where the mix of medicines is becoming more personalized and more targeted to the individual patient, which is driving our strategy to help our customers be more patient-centric. The greater use of digital, certainly a trend that we're helping to drive in the industry as we aspire to help make the industry more efficient. And then also, our customers are thinking and rethinking about their commercial model. So it's on us to help make them more agile and efficient and think about newer stakeholders beyond just the health care professional. And given what's happening in the industry, our focus is on bringing these 4 core pillars of commercial together: data, analytics, content and engagement. In data, we talk about our strategy as being -- helping the industry to be more modern and connected. In modern, we mean using our technology to connect different data sets together, to source unique data sets and to integrate them into the software applications where the business users need them most. Connected is about bringing all those data sets together to create a real clear picture and deeper visibility. And then taking those insights from an analytics perspective and surfacing them real-time where they can take action on them. As the industry is becoming more digital, they're using more content, and we're helping the industry to scale, to develop and create that content faster and to do it in a more scalable, more cost-effective way. And then, of course, it's about the engagement side. We know that the industry is becoming more digital. We're helping to enable that shift. And then also hybrid ways of working, making the field user as comfortable in the doctor's office as they are in their home office. And then, of course, putting the power of digital in the hands of health care professionals so they can get information when and how they want to from pharma. Commercial Cloud is how we execute. And Commercial Cloud is really unique in that it brings together software and data and people. And historically, we've cleaned up the software space where we've taken fragmented and siloed software applications and built really innovative, unique software applications and connected them all together like we did with our engagement channels and with content. We're taking that same approach to data. The data space has lacked innovation for a very long time. Legacy providers haven't innovated or changed much. And what we're going to do is take a very modern approach to data, connect all those data sets together and integrate it into the software applications. And then take people, business consultants that have deep domain expertise and really keen visibility into innovation as possible with Commercial Cloud so they can take a strategy and bring it to life with execution. We started with Veeva CRM. We became the market leader in CRM and then built a suite of products around that, and that's Veeva CRM suite. And we're continuing to help move the industry to Veeva CRM suite and help the industry become more efficient. Now to put that into perspective, the relative framing, CRM, the rep-based revenue products is roughly 60% of our overall commercial subscription revenue. And that mix will shift over time as more and more of our data and analytics products become adopted. From CRM, we expanded into content, delivering on PromoMats and MedComms. And those today are also market leaders in their areas, and we continue to innovate in PromoMats and MedComms. We've also integrated our content applications into our engagement applications. And when we did that a number of years ago, that was highly unique, and it's still unique today. We create a really significant amount of value for our customers and efficiency by connecting those channels up together seamlessly. We then expanded into data and analytics. In analytics, we started with Nitro as our data science platform. We acquired the Crossix business, and Crossix is for marketing optimization. And that business is going really well, and we'll talk a little bit more about that in a moment. And then our data products. OpenData has a very long history, and it's created a lot of value for our customers. Our OpenData customers are very, very happy, and this is health care professional, health care organization, affiliations data that our customers buy from us. And they -- and we also continue to enhance OpenData over time. We'll talk about some of the enhancements in a moment. Data Cloud and Link. Data Cloud is our newest set of products, which is patient prescriber and sales data. And then, of course, Link, which is real-time customer intelligence, key customers and key people in the industry. Now to frame up the overall TAM for commercial, we talked about the overall TAM as being $6 billion. Roughly half of that is in data and analytics, and the other half is in software, which includes content and engagement. And we're enabling our strategy on top of a very steady and stable and broad foundation. And Veeva CRM is that foundation, which we're building on top of and connecting and creating a lot of those connected points because it's fundamentally about enabling the industry to be more connected with our customers and engage more efficiently with them. This is really, really hard to replicate. And the reason it's so hard to replicate is because it spans all of these areas, creating a CRM global solution that works globally in all of these different markets, but meets the very specific needs of each country. So Japan is very different than Italy, it's very different than the U.S., and Veeva CRM is able to enable that, but also have a customer to get all of the efficiencies in having a global solution. Specialty models. We talked about the shift to specialized medicines, which is changing how companies are going to market, and we need to support an oncology medicine as well as a rare disease medicine or a gene therapy just like we would do a more traditional biotech. Enabling different roles like medical science liaisons or key account managers or a specialty rep. Veeva CRM needs to be great at doing all of them, and it is. And then hybrid ways of working, this idea that customers -- our sales reps are working in the field. They're working from a home office and their experience needs to be great regardless of where they're working from. This is why Veeva CRM is so hard to replicate. And you've seen this play out a bit in the industry with others trying to attempt this, but it's just a very, very challenging thing to do. And we're building off of this foundation. And that foundation that much of the industry has put in place has enabled them to move with speed. So as they've been pushed into becoming more digital at a much faster pace than they may have anticipated, they were able to. So you see some of the stats on the screen here that give you a sense of how much digital the industry is doing over the last several months. The industry has never really seen this level of digital adoption at such a rapid pace. So we're helping the industry to become more efficient. And again, this is because it's built on such a stable and broad and powerful platform, we're able to turn on a lot of these capabilities. We're proud to have enabled the industry to move with speed and to help the industry become more efficient. And we've talked about the industry taking some of those productivity gains that they've gone from becoming digital and applying them to rep reductions. And you're seeing that -- we talked about 10% as the number where we expect rep reductions to play out, and we think that will play out through the end of fiscal year '24 with much of it happening by the end of next year. So again, we're proud to be part of that solution and helping the industry become more efficient. Now digital is certainly a key aspect of the go-to-market model today and will be into the future, but rep relationships certainly matter. Reps matter. These are -- remember, these are complex medicines that biopharma companies are selling, and it's really important to have a human being that surrounds that digital. And in fact, our data shows that when there's a rep relationship, the digital access and digital engagement is 3x higher than if there is no rep relationship. So it's important to remember that these kinds of medicines will always require a human being, a sales rep, somebody helping the health care professional and that broader ecosystem understand how to use those medicines. And when they have a relationship, it's even more powerful. And as digital continues, we've also seen from our data that content also equally matters. So when content is used in those interactions with customers, the interaction is 2x more effective, which is driving our strategy around helping our customers use content efficiently. And that's about faster content at scale. And our vision is to continue to increase the speed to market by 75%, and we're doing that through technology, but also business consulting and using data and insights to drive a lot of those efficiency gains. So we -- our vision is to touch every aspect of that content creation life cycle from the time there's a strategy and idea to the time it's created, approved and pushed out in the field and used. Whether it's in a sales rep's visual aid or on a website somewhere, we want to make that process more efficient. We're innovating in areas like modular content, which is creating new ways of reusing content more efficiently, helping customers with their operating model for our business consulting services, but then using deep insights and intelligence about content to drive greater visibility and, therefore, efficiency. So excited about the progress we're making in core content. And of all of that innovation that we talked about in core CRM and PromoMats, we're taking that same innovation engine, and we're refining it to data and analytics. And our strategy there again is to take -- create a modern approach to data and analytics. So let's talk a little bit about what we mean when we say modern approach to data and analytics. Historically, data has been highly fragmented, really just like the software market has been in the past, and we've cleaned up the software space. And the data space has lagged behind. The legacy data providers have not really innovated for a very long time. In the data sets, they don't work together. They're generally not connected, and that creates a huge burden on our customers. It is ultimately not so valuable if you can't connect it with other data sets. And that's a key part of our strategy is to bring all of the data sets together, but connect them with the software that they need to be surfaced because ultimately, data needs to be surfaced as an insight where somebody can make sense of it or make a decision or use it to take some specific actions. So our strategy is create unique data sets that are high value and stand alone, are super valuable and innovative, but are also connected together with all the other data sets and then integrate them into the software where they're used. The strategy is highly differentiated. And the way that we do this, the unique and connected data, the way we connect is through this idea called the Veeva ID, which means we stamp and identify all of our data sets. The same common identifier, so it's really easy for us to connect them, but also, more importantly, for our customers to connect all those different data sets together. And these are the big data sets that we're talking about. OpenData, again, as you -- we've had this business for a long time, and we continue to innovate and create innovation and even have a road map for data. That concept is unique in the industry. We're treating it like a software product where OpenData gets better and better and better over time. And our OpenData customers are very happy. This is a much better alternative to anything available in the marketplace. OpenData is that foundation that provides the source of that Veeva IDs to health care professionals, the health care accounts and the organizations, how they're related, their affiliations with each other, and it's the backbone of a lot of the data sets that we provide and helps us to connect all those pieces together. We also have Link, and Link is real-time customer intelligence on key people. And we curate data using machine learning and using people to source all of this rich information, and we provide very rich and meaningful and deep insights. And the best way to really appreciate Link is to see it. So let's take a moment and we'll show you a short demo. [Presentation]

So you just got to see how Link was able to surface really interesting information about things like clinical trials, associations, congresses, but also key people. You're able to find key people based on very specific dimensions like lung cancer, as an example, and their location and then deeply profile them. But also you saw at the end here that -- how we integrated that data directly into Veeva CRM. So it's really powerful stand-alone, but again, we're integrating it into the software where people can use it most easily. And then we have Crossix and Data Cloud. And Crossix and Data Cloud are both built on the Crossix Data Platform. Crossix, of course, is our marketing optimization, which we acquired. And we took that business and we continue to innovate around that business, and that business is performing very well. It will continue to be a contributor over the long term for Veeva, particularly as we add new innovation in the Crossix core space. One example is how we took the core CRM activity data, and we've embedded that data into the Crossix analytics. So now customers that are both customers of Crossix and CRM, they can see not only their marketing, but also their field activity against those same sets of target health care professionals. So that's very powerful. We're using the same Crossix Data Platform to drive Data Cloud. And let's take a moment to talk a little bit about what Data Cloud looks like. Data Cloud is really 3 products, one of which is available today, which is patient data. It's available for early customers. Our early customers are using it, and we're taking a very different approach in patient data. We're taking a patient-centric approach, patient-centric as opposed to prescription-centric. So the legacy providers, I think in the approach of aggregating and syndicating data from all of the retail pharmacies. Now that's prescription-centric. We're taking a patient-centric approach, which is looking at diagnoses and procedures and prescriptions, and we're assembling that around a complete view of the patient, which is better for today's more modern medicines. The precision medicines and specialized medicines that we talked about earlier, they need something that's more patient-centric and patient-specific, and that's what we're doing with patient data. And that's proving out to be very valuable. For our early customers that are using it, they're finding more health care professional targets that they can call on. So this data is more valuable for how they segment and target their customers. So we're pleased with the progress we're making in patient data, and we're going to continue to use that Crossix Data Platform to build out new data sets. Prescriber data will be the next data set coming in January. And prescriber data is really that longitudinal, now around a prescribing physician. So that same level of really patient-centric data organized around a health care professional, really valuable and also used for things like segmentation and targeting. We can drive a lot of value in those areas because they're really core business processes to a life sciences company. And then sales data, we're also pleased to deliver on that, and that will be available in January of next year. And sales data is the data that pharma companies use to measure the performance of their field, but also to do incentive compensation. So Data Cloud is addressing a really significant market opportunity. There hasn't been a lot of innovation in this space, and we're going to bring that innovation, taking a very modern approach using technology. We're using technology to source and combine, connect and even enable our customers to consume the data via our software. And that's a very different approach. And then, we're going to deliver on new sets of data over time. And we see this as a really meaningful growth contributor as we get closer to 2025. So with that, I'm excited to share a lot of our innovation that's driving the industry to new levels of efficiency, and this is all enabling us to deliver a very durable revenue business with really steady growth over the long term. And we're doing that through really consistent execution. We do what we say we're going to do. That's a key part of our formula is consistently executing over and over and over again for our customers and then never stop at continuously innovating. So all of our products, existing products get better over time. And then we also create new products and then seamlessly connecting all of those products that are designed and built to work together, creating really new and unique value for our customers. So thanks for listening in to the commercial update. And with that, I'd like to turn it over to Jim to give you an update on R&D.

Thanks, Paul. I'm Jim Reilly. I lead Development Cloud strategy here at Veeva. In Development Cloud, we have a big vision. We're providing the operating system for the full life cycle of the product. That's a massive vision. It's a hard thing to build, though, because it's so expansive. You have content, data, process touch points and handoffs, and it's deep. It's a very large data model with hundreds of objects and thousands of data elements. No one has really ever tried to do this before. It's kind of like making the MS Office for product development, and it's still relatively early. 2014 is when we had the idea. And when I joined in 2015, it was really about the content management applications, things like submissions and quality and the trial master file. And then in 2016 is when we fully committed to the idea. That's when we decided to provide data-oriented applications. And now it's becoming a reality. All of the major verticals of product operations are represented. First, there's clinical, which is all about building and executing a trial and collecting and processing trial data. Then you build a regulatory package, showing that the products are safe and efficacious, and then you submit them to the health authorities. And then you manufacture according to quality standards, and you monitor it for safety in the population. And all of those are not onetime events. Most of that process follows even after a product is approved. So what we're offering is valuable not just for developing the product the first time, but for the lifespan of the product's life cycle. It's not an all-or-nothing proposition either. The nice thing is that a customer can start with us anywhere, do well and then add on more over time. All of this makes Development Cloud very durable. It's not the kind of thing you want to switch out for something else very easily. Now let's take a quick view into each area. We'll start in clinical. So the clinical suite is made up of 2 application families: there's clinical operations and then clinical data. In clinical operations, that's where our customers go to manage the execution of the trial, from start-up to execution and closeouts. And then there's clinical data. This is where a customer builds a study for data collection. Usually, people think this means EDC, but Vault CDMS is bigger than EDC. It also includes the CDB, that's the clinical database, which is the place where all study-related data is ingested for cleaning and formatting so that it can be analyzed and submitted to health authorities. So CDMS is unique in that all of it is self-contained. And then clinical operations and clinical data are connected across to share things like patient enrollment and visit status. So it's even more efficient for customers who use the whole clinical suite. Now if we dig into clinic operations, it's all about speeding execution. Our customers are consolidating dozens of systems to run their clinical process end to end on one app. And even though it's been maturing, we continue to innovate. We just released a new capability called the TMF Bot. It's an artificial intelligence and automation feature that automatically classifies content files, which can save a clinical team a lot of manual effort. It's a new capability, but already a top 20 pharma has been using it with promising results. They've had tens of thousands of documents auto classified at a success rate of auto classification at 99%. So it's about efficiency and better accuracy than what they do today. Now we're growing adoption overall in clinical operations with over 350 customers, including 16 of the top 20 on eTMF. And we've got over 110 customers in CTMS, which is only a 4-year old product. And then there's CDMS. Here, it's all about speeding trials and keeping them on course. Customers using CDMS are seeing 50% faster study builds than what they could do previously. And when a protocol is amended, there is no database migration required, which is the industry norm. And we're innovating with the CDB. As I mentioned, that's all the sponsor study data coming into one data hub for integrated cleaning, reporting and export. So together with EDC, this is all about complete and concurrent data which helps customers clean data faster, make better decisions and run more effective trials. And we're starting to see some good uptake now with over 250 studies built and now almost all of the top CROs offering the service to build on Vault CDMS. And then over to regulatory, at the Vault RIM Suite, where a customer goes to manage their end-to-end investigational and marketing approval applications to health authorities. The users offer the content for their submission, they publish and they send to a health authority to keep a compliant record. And if it's approved, they manage and maintain the product registration in each country where the product has been approved for use. And regulatory in Vault RIM is transformative because it's all in one. In a large pharma, there's usually dozens of these tools I mentioned, and they're usually split by region. Whereas here at Vault RIM, it's one place to go for their global organization. And more than that, we're innovating. We've recently built Vault Publishing. And this is not an easy thing because there are different publishing standards across the globe, many of them are electronic, but some are still on paper. And we're making it faster and more streamlined for our customers. Also, we launched Collaborative Authoring a few years back. And this is where users can author and annotate a document together in real-time over Microsoft Office. It's a big timesaver, and we already have over 95 of our RIM customers using this today. And then the RIM Suite overall, we continue to see strong adoption with over 250 customers, including 13 of the top 20. And we also have 25 early customers on publishing, which is a newly released product. And then if we turn our attention over to Quality, in just the last year, we've broadened our strategy. As customer adoption has grown on leading solutions like QualityDocs and QMS, manufacturing QA groups have been viewing Veeva more strategically, more so than the standard incumbent players. So now the Quality Suite has evolved into a more robust capability, supporting the needs of quality assurance, quality control and manufacturing. And it spans process, content, training and the quality control lab. As part of this evolved strategy, we recently announced 3 new products. Vault Validation Management is for managing the validation process across all disciplines in efficient and digital way to remove the paper from that process. Then there's Veeva LearnGxP, which is a training content product. It's not an application, but it's actual e-learning content modules with more than 150 credited courses and 500 micro-learning videos. It complements the Vault Training application. And then finally, there's Vault LIMS, which is a big new area for Veeva, where we want to optimize the quality control lab operations to get closer to real-time product batch releases. LIMS and Validation Management are targeted for the second half of next year, and these are big new areas of innovation for Veeva where we can bring more value to the industry and provide more market potential as well. So the industry is modernizing their approach to quality with the unified Quality Suite, and they'll have the ability to build from there as we launched into these new areas like LIMS and Validation Management. We're also innovating the core of Quality with things like Process Navigator. This is the ability to define and visualize quality processes hierarchically along with the supporting content in a single screen. It's a big efficiency game and it's a compliance driver. And then there's a quality event recurrence check. Quality people need to identify patterns of events that may have a common root cause and resolution. And this event recurrence check is an automation feature that lets them work more intelligently to identify those recurring events. And in terms of momentum overall in Quality, we've seen strong growth with over 350 Quality customers, including 15 of the top 20, and very strong uptake in QMS and Training, which are only 5 and 3 years old, respectively. And finally, the newest area of Development Cloud, Vault Safety. This is a big, complex area, and we're now in year 2. We launched into this space because there are 2 major incumbents that the industry is not satisfied with. They're looking for better execution and more innovation. And safety is an incredibly important area. If the safety system goes down, the product stops being sold. The fact that we're bringing safety to the cloud is also important. It means our customers won't have to upgrade every time there's a regulation change, which is what they have to do today. So in this suite, we're covering the data by bringing in case intake and processing as a capability. And then we're marrying that up with what's required for content. And then in the longer run, we're offering up the analytical capability to detect safety signals. Now even though safety is traditionally a very conservative and highly regulated area, we're making excellent progress. Our first customer went live in August of 2019, and it's been a steady stream of go-lives since. We now have over 50 customers, including a top 10 pharma now implementing. And while we're currently very focused on customer success, we also believe there's innovation we had in the signal area. There's exciting times ahead in Safety. So that was a quick tour of Development Cloud, which covers what I like to call the back-office systems for the sponsor world. But there's also a front office in dealing with research sites and patients where we've been formulating a strategy and building capabilities, and it's what we call Digital Trials. So quickly on the need there. The industry is looking for a way to innovate in trials, and it's really a holistic need. Each stakeholder needs attention. The sponsors, they want to run trials more efficiently. Sites, they're overburdened with technology, and they want to simplify. And then patients, patients need better ways to participate and engage in research. And then all of the stakeholders need to be thought about together because they're all integral to the trial. But that's not how it works today with current and new offerings. The landscape is riddled with point solutions, some of them that focus only on the back office for sponsors or those that focus only on the patient experience or the sites or they're a middleware between 2 of them such as site portals. Like we saw with internal sponsor operations, this dynamic is in need of a more holistic platform approach. So that's Veeva's vision for Digital Trials, a platform that is patient-centric, which means a single experience for the patients' needs to engage in research. Decentralized, meaning bring the trial to the patient by allowing for remote options such as virtual visits. And then finally, paperless, to remove the paper that is still rampant in the process and thereby digitizing the information flow. If we do this well, we think with our customers, we can lead the industry to trials that are 25% faster at 25% less cost. It's a very different approach that hasn't been attempted before. Our strategy is to provide great software specifically designed for each stakeholder. So there's the back office for the sponsors, their operations, that's the clinical suite for them to manage their internal shop and the data that they manage. And then there's the front office with the research sites and the patients. It's where the care happens. So with research sites, that's where we have SiteVault, which is a free application for research sites to become more efficient in how they operate. And then for patients, that's the MyVeeva for patients app, which is a single experience for patients to participate in and engage in clinical trials. The Digital Trials Platform will then connect these stakeholders so that you have better collaboration, greater visibility and more efficient trials. Compared to many of the new players now entering the space, we have a key advantage in that we can leverage the strong relationships we have with our over 400 sponsor customers in clinical. And we've already got this going with our first 2 applications now available and in use, which are Site Connect, which connects the sponsor and the research sites; and then eConsent, which is used by the sponsor of the research site and the patient to manage the patient consenting process. But there's lots more to build and deliver over the coming years. Now with something so visionary, it's important to have good partners, especially early on. They help to shape aspects of how the product needs to work in the real world. This has been a recipe for success of Veeva when we build a new product area, and I'm happy to share that we now have our first full Digital Trials early adopter in LEO Pharma. We have lots of work ahead of us together, but it's already off to a great start as a partnership. So we're on a big mission for Development Cloud, and that's still early days and growing. And then we're tackling a new area that we're just getting off the ground with Digital Trials. To be successful, we'll continue to be a strategic partner to the industry by taking on the big problems with complete and novel solutions. And we'll continue to innovate by finding new opportunities to help the industry that will also help broaden our reach. Now we'll get to the highlight of the day. We get to hear from a customer. I'll hand it over to Tom.

Hi. I'm Tom Schwenger, President and COO of Veeva. And it's my pleasure today to welcome Alessandro De Luca, my friend and colleague from Merck KGaA in Darmstadt, Germany. Welcome, Alessandro. It's great to see you.

Thanks, Tom. Thanks for inviting me here.

Great to have you. Merck KGaA is a global science and technology company with more than 58,000 employees worldwide. And just a few examples of Alessandro's leadership include a 2020 mention by Gartner in their executive yearly report for implementing a state-of-the-art digital transformation and supply chain; and in 2019, being named one of the Top 100 Most Influential Leaders in Healthcare by the International Forum for Healthcare Advancement. Previously, Alessandro had been the Merck Healthcare CIO, serving a portfolio of solutions across R&D, commercial and business franchises. He joined Merck with responsibility for the health care supply chain operations, including end-to-end planning, physical distribution and warehousing. Prior to Merck KGaA, Alessandro worked at Procter & Gamble for 20 years, holding positions across innovation, manufacturing, engineering and supply chain management. Again, welcome, Alessandro, and thanks so much for spending time with us today.

Thank you.

So let's start with a brief introduction to Merck. Merck is a 350-year-old company with a long and diversified history. Can you give the audience a high-level view of Merck and how your company is evolving its focus?

No, absolutely. Thanks for asking this question, Tom. We are very proud to be one of the oldest pharma company in the world. I mean definitely more than 350 years is a proudness. Proudness in terms of sustainability of business model and people and drive forward science and technology. And this is exactly what we are. We define ourselves a vibrant science and technology company. Why vibrant? Because we believe in the curiosity of minds. We believe in innovation. We believe in drive forward the next generation of drugs. And that is also where science enter into the picture because, obviously, science is at the heart of everything we do. When we discover a new molecule, where we implement a new process, we'll develop a new solution for our customers. And then there is the technological elements, vibrant science and technology. The technology is mainly digital. I mean not only, obviously, but in the last 5 years, the company has decided to definitely include digitalization as one of the key strategy, and the progress in this area has been significant.

That's great, and especially that focus on digital recently. Given that, what role does the CIO play in enabling that kind of company-wide evolution that you just described?

Yes. Obviously, the role of CIO is pivotal to drive and to foster all this digital innovation and to make sure that backbone infrastructure support value creation with new digital model, support value creation with solution for our customer, support value creation in terms of new supply chain solution, architectural and go-to-market. So this is why the work of the CIO is very, very important. And obviously, the CIO is nothing. It's the people behind the CIO that makes a difference.

Yes, absolutely. And if we were to double click on that, within your health care sector, what are some of the biggest initiatives you have going on within Merck right now?

Yes. In the health care sector, I would say that there are several initiatives that have a digital connotation that is very strong. One is virtual customer engagement. And we have seen it in COVID time. That was important to continuous engagement with the customer and to make sure that will happen virtually. And this is where -- you know it very well, we partner with different solutions with you, CRM model, we've engaged and so on, and they were very successful. The other element is digitalized clinical trial. Obviously, that is the most important development that we could have in the digital space for R&D, and that's where we have focused a lot of energy and focus.

That's great. Thanks for that. And you were recently named group CIO across the whole of the company. And when you look at this new role that you're in, how do you think about the role that vendors play in the broader ecosystem? What is it that you're looking for companies -- looking for from companies like Veeva? And how can we best support you in that journey as well?

Yes. I mean you said the right word, Tom, it's partnership. I mean partnership is definitely what we expect from all vendors like you and your company, and that is a long-standing partnership that the 2 companies have to get. And what I would say is that the 2 criteria that we drive throughout the company is scale and adoption. And scale means that we really need to make sure that our solutions are scalable worldwide. We have seen several examples of small pilot projects, but it's really where scale happens that you drive business value. And we've been able to scale, together with you, our CRM solution, Veeva CRM across the board, not only our Veeva PromoMats and so on. Then the other element is adoption. I mean I believe that the success of any digital solution is in the adoption of the user, the customer and the patient. And if together with us, you help us to drive in this direction of scale and adoption and you co-create, co-innovate together with us, and that's what we are doing together with this Veeva release that's happening continuously, then we continuously drive an improvement of the -- towards the digital journey day after day.

Yes, that's great. I really like how you frame the importance of scale and adoption on that journey that you're on. When you think about the partnership with Veeva that you just described so well, are there any specific examples that jump to mind for you in terms of that partnership coming to life?

Yes. I mean we partner on several areas. I think one of the most successful example has been the recent introduction of Veeva RIMs, and that has been really fantastic. And when I say fantastic because the teams have worked together, your team, the information technology team, the business team of Merck, we all work together as single one team. And then the execution was flawless. I mean really flawless, flawless in terms of implementation, flawless in terms of users and very much appreciated by all the users around the company. So that is fantastic.

Yes, thanks for that. That's really appreciated. And I guess the ultimate question for all of us, when all these things come together, when your strategy comes together and the ecosystem is working well and you're delivering, how does that come to life for patients and caregivers? How does it make a difference in the lives of patients?

Yes. Yes, I mean, Tom, this is definitely the most important question, the most important question of all because at the end, we are all here to serve better our patient, to improve the lives of all our customers and so on and so forth. And here is that where I think we can bring it forward. The next generation of digital solution is really moving towards an end-to-end model. This is something that we have been talking together. We are working together. I know that we are doing it. It's probably a competitive advantage because not many companies have done it really scaling end to end, from R&D to the customer and backwards. And this will enable us to really drive a sort of better personalized medicine, predictive medicine. And this is what the customer and patient wants. So if we are able to continue this journey successfully together, I'm sure that we'll be able to serve our patients better together.

Yes, absolutely. And it's really exciting and an impressive part of that journey that you're on at Merck. I think we're about at the end of our time. I did want to thank you very much for spending some time with us today as well as for your partnership over the years, both personally and across the whole company of Merck. I look forward to many years ahead of continued partnership, and we'll talk again soon. Thanks very much, Alessandro.

Absolutely. Thanks, Tom.

Take care.

Thank you, Tom and Alessandro, for the informative discussion on the partnership between Merck and Veeva. Veeva is helping our customers solve the most critical problems of the life science industry through our focus on customer success and product excellence. Our proven ability to execute, together with our reference selling strategy, create a durable operating model and has driven Veeva's success to date and will continue in the years ahead. As I approach nearly 1.5 years at Veeva, I'm even more confident we have the right vision, the right people and a robust product portfolio to enable customer success. Driven by our strong execution and momentum across the business, I'm happy to report that we are tracking ahead of our 2025 target of $3 billion in revenue with a greater than 35% operating margin. I'm very proud of Veeva's execution as we continue to build on our history of strong growth and profitability as a result of our proven operating model. Over the next few minutes, I'll cover our progress towards our 2025 targets and provide some highlights regarding our long runway for growth. Veeva has a consistent history of revenue growth and increasing operating income as we continue to expand our role as the most strategic partner to the life sciences industry. We are focused on helping our customers to be more productive by creating innovative products and solutions that make their most critical operations more efficient. The focus on innovation and customer success continues to drive our growth and underpins our fiscal year '22 guidance of 25% revenue growth and operating margin of roughly 40%. Today, we are introducing a change in how we report revenue. Revenue reporting will now be broken out between R&D and commercial. This realignment is consistent with how we manage the business with all of our commercial solutions now reported as commercial revenue. Specifically, we will now report on both commercial offerings, which include PromoMats and MedComms, in our Commercial revenue. R&D revenue will now include our clinical, regulatory, quality, safety and consumer products and chemical suites of products. In terms of our fiscal year '22 guidance, this realignment moves roughly $165 million of subscription revenue related to PromoMats and MedComms from Vault to Commercial. On a realigned basis, our fiscal '22 guide is for commercial subscription revenue of roughly $865 million and R&D subscription revenue of roughly $610 million. Our total fiscal '22 subscription revenue guide is unchanged at $1.475 billion. This implies a revenue growth rate of roughly 40% for R&D and 16% for commercial in our fiscal '22 guidance. Please refer to our Investor Relations website where we have just posted historical revenue data reflecting this realignment. We are tracking ahead of our 2025 targets, and I'm both encouraged by our disciplined execution and excited about the many growth drivers ahead. The revenue realignment does not impact our 2025 revenue target of $3 billion, but it does shift the mix slightly towards commercial. We continue to expect operating margins above 35%. We are more confident than ever in our ability to achieve and exceed these targets, and I'm pleased to see Veeva progressing ahead of these goals. We are raising our TAM estimate to $13 billion plus to reflect our recent innovations, including the new solutions in quality and digital clinical trials that you heard about earlier. This marks the sixth consecutive year where our TAM has grown by at least $1 billion. The growth in our TAM reflects Veeva's focus on addressing our customers' most challenging problems and bringing innovation to new markets. This is core to both our operating model and our role as a strategic partner to life sciences industry. Looking at the components of our TAM, the $6 billion opportunity for commercial is split evenly between our data and analytics products such as Crossix and Data Cloud and our software products, which include our core CRM platform, add-ons and content products. Clinical is our largest single opportunity within R&D and reflects a significant room to grow that we have across clinical operations, clinical data management and digital trials. Outside of clinical, we estimate a $3 billion TAM across our quality, regulatory, safety suites, where Veeva is bringing innovation to these large and complex markets. Within consumer product and chemicals, we continue to make progress in the $1 billion opportunity as we grow towards a $100 million revenue target for 2025. Based on our fiscal year '22 revenue guidance, Veeva is only 14% penetrated to its TAM and has a very large market opportunity with $11-plus billion of room to grow. We have the product portfolio and trusted customer relationships to address this large opportunity. The breadth and strength of our product portfolio is driven by our continuous focus on innovation for customer success and provides confidence that we can deliver against the large and growing market opportunity in front of us. This chart provides a great view into where each of our products sit along the maturity curve. On average, it takes about 3 years to get to the innovation and early adopter phase where we work with pilot customers to ensure product market fit. The early majority phase is where we start to see meaningful market share and revenue generation through our reference selling model. We expect to achieve market leadership within the middle majority phase. As you can see, a large portion of our products are still in their early days, which will help drive long-term revenue growth as they move up the adoption curve. R&D product adoption and new customer adds continue to experience strong growth. Through the first 6 months of the year, we are on pace to add over 175 customers in fiscal year '22, which is well above the roughly 120 customer adds in each of the past 2 years. Equal in importance to the growth of our customer base is the growth of product adoption within our existing customers. We continue to believe that the majority of our future growth will come from these expanded customer partnerships. A steadily increasing portion of our R&D customers are using 3 or more products, which reflects both the breadth of our product portfolio and increasing value that our customers receive by adopting additional products. Our customers are seeing the benefit of a single integrated platform across their R&D needs. And with 25 products across our R&D portfolio, we are excited about the significant opportunity to expand our footprint within our customer base. We are building our leading market position in Veeva CRM with both strength in new customer adds and growing product adoption within commercial. Since fiscal year '17, a steadily increasing portion of our commercial customers are using 4 or more products. These expanding customer relationships reflect the growing trust our customers have in Veeva and the value we provide as a strategic partner. Our early innovations, such as Veeva CRM, CLM, Approved Email and content products have the broadest adoption amongst our commercial customers. Last year, we saw a boost in engage adoption as our customers in the industry moved to digital engagement models during the pandemic. Our customers continue to adopt our newer add-ons, including Events and Align as well as other commercial products like Network. Looking ahead in commercial, our innovations in data and analytics solutions, such as Data Cloud, Link and Crossix, will be meaningful drivers of growth for many years into the future. It is still early days for a number of our commercial products, and we have plenty of runway for growth ahead. Veeva's operating model produces an expanding operating profit while investing for future growth. More recently, our operating margins have benefited from COVID-related reduced travel expenses, equal to roughly 200 basis points in fiscal year '22. This is most apparent in our sales and marketing spend. While we expect some level of travel expenses to return over time, it remains difficult to predict when and by how much. Equally important, we continue to invest across our business to address the large and growing market opportunity with a focus on customer success. This includes continued investments in our people and products. We are tracking ahead of our 2025 operating margin target of 35% plus while also continuing to invest for long-term growth. Our gross margins benefit from a high mix of subscription revenue as well as increasing mix of R&D revenue, which is based on the Veeva Vault platform. Mitigating these benefits will be additional product investments, such as in Data Cloud, we are taking a new approach to targeting data as well as expanding our business consulting services. These and other investments in people and products reinforce our role as a strategic partner to our customers and to the industry. We are pleased with the durability and the leverage we have in our operating model and the optionality it provides to invest for long-term growth. In closing, I'd like to leave you with a few key takeaways. The team continues to deliver strong financial results through disciplined execution that is driving momentum across the business. This has us tracking ahead of our 2025 targets of $3 billion in revenue and over 35% operating margin. We're helping our customers solve the most critical problems of the industry, and we'll continue to benefit from deepening relationships with our customers. This provides for a large growing market opportunity and a long runway for growth. Our proven ability to execute, together with our reference selling model, create a durable operating model. This enables Veeva to continue to innovate and invest in new product development to support future growth towards 2025 and beyond. With that, let me turn it back to Peter for some closing remarks before Q&A.

Thanks, Brent, and thanks to Alessandro. It's great to hear from Alessandro. We really appreciate the partnership. To recap, it's an exciting time for Veeva. We have large opportunities ahead as we look to become essential to this large and important industry. In other words, we have the right strategy. We also have the ability to innovate and execute. That's about having the right team and the right operating model. That sets us up very well for 2025 and beyond. And now we'd like to open it up for your questions.

Thanks, Peter. So as a reminder, feel free to enter any questions that you might have using the widget on the web tool or you can e-mail them to [email protected].

And our first question, I think it's for Paul. Can you help us size the impact of the 10% rep reduction? And how confident are you that 10% is the right number? Reps have been pretty steady over the last decade or so. So is there a chance that some of these reps that might be -- that some of these reps could be reallocated to new precision medicine therapies?

Yes. Thanks. You got a couple of questions in there. I'll take the sizing the headwind question first. Maybe let me give you some way to frame how to think about that. So the -- from a headwind perspective, if you go back to the beginning of the year and use that as a baseline, we're expecting a 10% reduction of rep headcount. From that starting point, we expect that will play out through fiscal year '24, with most of it happening this year and next year. I also mentioned earlier that about 60% of our commercial subscription revenue was rep-based. So if you do that math, you come up with a total headwind of about $50 million, and that will -- that's an impact on our annual kind of revenue run rate, which will play out over time. So that gives you some way to kind of size that headwind. Do remember that as those headcount reductions occur, some of the impact on revenue may trail the actual rep reductions. So that's the headwind side. The offsetting factors in that, we do expect growth in commercial to more than offset those reductions. So for example, as our customers become more digital, as they're using more -- as they introduce more precision medicines in the marketplace, they need better data. And we expect that will be a growth driver for our data and analytics business, and you'll start to see that mix shift from that 60% of commercial subscription revenue to lower over time. We also expect to have additional gains in core CRM and additional penetration in the add-ons, again, all of which will more than offset some of the headwinds that I talked about. Your second question embedded in there was the size, the 10%, why are we confident in that 10% number. And it's simple, we have lots of conversations with lots of customers, and they triangulate and we triangulate that number. Now some companies may be slightly higher. That's an average. Some may be lower. And even within a company, you may have some therapeutic areas which are more, as you mentioned in your question, more precision medicines where they may shift more users from more of a primary care environment into that precision medicine space. So we do expect some shifting to happen within companies and across companies. But on average, it will be about 10%. Remember, these are complex medicines. You need people, you need human beings to sell and introduce these drugs into the market. The rep selling model is so foundational to the pharma industry. But that's not going away, and digital is actually better with reps.

Great. Thanks, Paul. Next question, I think it's probably for Jim relating to digital trials. So what's the broader opportunity in digital trials across patients, sponsors and sites? And can you help us understand the value of that connected network between those over just the decentralized tool?

Sure. Thanks, Ato, and thanks for the question. Well, for all of you paying attention to this decentralized digital trial space, you know that's getting very frothy. It seems like any technology vendor or service vendor that's using the phrase decentralized trial is getting funding. Now our perspective is pretty simple, it's that those solutions that we're seeing come on the market are point solutions. They're offering technologies that assist in the patient area and the site area or the old guard of the sponsor area. And what Veeva is bringing in the table is just something that's very different. It's something that brings great technology to all 3 of those stakeholders, but then also brings it together as a platform, kind of like a business network. And for us, that's the big differentiator. That's going to be what solves the challenge of what will this new mode of trial operations look like. When you look at a lot of these other vendors, they're also offering services to complement the software. And whenever you offer services and software together, that's frankly a project, it's not a product. And so again, Veeva's differentiator here is bringing this platform approach to the way that digital trials can operate.

Great. Thanks for that, Jim. The next question, I guess, we'll go back to Paul on Data Cloud. What are you seeing from early customers as you roll out capabilities? And what's been the initial market perception versus some of the incumbents there? And how are your additional efforts progressing around offering new functionalities like sales data and prescriber data?

Yes. So where we are with Data Cloud is we've -- our patient data is available. It's our first data set that we're delivering as part of Data Cloud. It's with early customers. We have a number of early customers who are actively using it and getting data from us. And the feedback is really, really positive, meaning they're finding patients that they did not find with their legacy data provider sets, which leads to finding health care professionals and new targets that they didn't find with their legacy data sets. So they're seeing and starting to appreciate some of that innovation that we talk about coming to life. So the -- it's really working with early customers. We're focused on those early customers, customer success in maturing the product. We are also in progress of building out the second and third data sets, which we'll deliver on, which is the prescriber data, longitudinal prescriber data, that really deep visibility into prescriber over time. And then also sales data, which is, as I mentioned earlier, just use more for field performance measurements and incentive compensation. And we're really very early days in both of those, and we'll start the process of early adopters in the beginning part of next year. We're excited about where we're going with Data Cloud.

Thanks, Paul. I think our next question here is probably for Peter about MedTech. So can you tell us more about Veeva's MedTech business? And how large is that business now? And how large can it be over time?

MedTech, we're really excited about MedTech. It's a great time of innovation and change, and it has a lot of variety. We have large diagnostic machines, implantable machines, large implantables, small implantables. So it's really exciting. In terms of the size of the business, it's roughly -- we should do about $60 million of revenue this year in MedTech. And in terms of its potential, I would say, in 2025, we're looking at probably more than $200 million of revenue in 2025. So exciting times. And highly related, Pharma and Biotech, MedTech, they're getting close together and they're getting essential to each other. So I'm very excited about MedTech.

Thanks. And next question is probably for Brent. And so why did you change the way we report revenue? And why did you do it now?

Thanks, Ato, for the question. Our updated revenue reporting really is just to align on how we manage the business, which is Commercial and R&D. A little bit of history, kind of back in the 2014, 2015 time frame, we ran the business with a Commercial and Vault view. Now it was really because our original Vault products were our commercial content products. So that has changed. So it's purely aligning our reporting to how we manage the business. And specifically, commercial products, the content products, PromoMats and MedComms are now reported in Commercial. One thing to highlight, this does not change our total revenue guidance for the year. It doesn't change our total subscription revenue guidance for the year. It just does change the mix between Commercial and our R&D. And specifically, the change was a bit dilutive to the commercial growth rate, which is now 16%, which was previously 17%, and it was a bit accretive to the growth rate, which is now 40%. It was once 34% for Vault.

Thanks, Brent. Jim, we have a question about some of our product traction in R&D. So it seems like we've had a lot of momentum across CTMS, CDMS and safety. And how are we thinking about the adoption curve for these products relative to some of our other more established clinical tools? And is there -- is this a tailwind that's being created? Or is this a cross-sell opportunity?

Thanks, Ato, I think there's also a question that came in about our first safety customer having been announced, and I think that somewhat relates to this question. So I'll bring all that together. So generally speaking, yes, the idea that we have a lot of success from some of our earlier products like eTMF, like QualityDocs, that helps when you think about the ability to sell some of our newer products like CTMS and Safety. And largely that's through a few lenses. One is the existing customer might already be using some of our technology in their functional area, right? They're likely a happy customer because we focus on customer success. And so the likelihood that they'll buy more from us in that area is certainly higher and also a bit faster than perhaps it was a new RFP for a new solution off the street. And then there's the idea of the cross-selling within the customer, what we call reference selling. So for instance, if a clinical customer is happy with using the eTMF and the CTMS, they might talk to the head of safety at that organization and say, hey, this Veeva stuff is great in clinical, you should give a look at it in safety. And when that first customer comes in, especially in the enterprise, that's a very important pivotal point for us because we focus on the project and we drive success, and that allows us to continue to expand in that market. Other enterprises know that our product and the way that we deliver it is enterprise-ready.

Thanks, Jim. So another question for Paul. So how does Veeva's data strategy compare to some of our competitors out there? And are we relying on unique data sources?

Yes. So our data strategy is very different, and we're taking a more of a modern innovative approach to data, which means using technology really through the entire data supply chain. From the time that we source data and we connect different data sets together and how our customers consume data, they're consuming it via Veeva technology. So technology allows us to be faster and more accurate and ensure that it's privacy safe. It becomes a big advantage for us. The other aspect that I would mention that's significantly different is that we're very much patient-centric in our data. So the opposite of that would be prescription-centric, meaning focusing -- a heavier focus on kind of the traditional retail pharmacy, small white pills, that historically was really important. And in today's environment, these specialized medicines that we talk about, it's more about patient centricity. So we use technology. It's more patient-centric. And that value prop again, as I mentioned earlier, is playing out nicely in the marketplace.

Great. This next question is probably for either Peter or Brent. But prospects and position of the world are about 2 years old now. So what are you thinking about in terms of M&A going forward?

I can take that one. M&A, we look at that as really acquiring people and ideas to fuel our growth. And so if we see something that can -- that's early, that can provide a spark, an ingredient, a fertilizer to Veeva that fits in with our strategy, we'll do that. First thing we do is look at our product strategy. What is it that we want to accomplish? And then we're constantly scanning with, hey, is there anybody that can complement that? And that's going to be generally rare, right? You're -- all of the stars have to line up. So we're not counting on M&A to provide us anything really, but we may do some when we find the right opportunity.

Great. And then it's probably another one for you, Peter. So 2021 has been a great year for biotech VC funding. And does the favorable funding environment help Veeva? And how so?

I think it doesn't change things in the short term for Veeva materially at all. But the funding, the early funding, that is a great indicator of long-term health of the life sciences industry. The funding attracts great people. Those great people do innovation and execution and great work. That grows the value that the industry can provide to the health care system, and therefore, that grows the value of Veeva. So I view it as a very early indicator, a great sign of health.

Great. Maybe a question for Jim again. Is the quality control product for lab or LIMS, the first offering of what could be a larger lab management platform for Veeva?

So when you think about lab technologies, there really are 2 buckets. Just like in pharma, there's 2 ideas of labs. There's the research lab that focuses on the research of creating new products. And then there is the lab that's associated with manufacturing. They're the ones that make sure that the quality control of the manufactured product is good before the product gets released, what we call batch. The LIMS product that we're offering is for that QC lab, right? It's part of our quality suite, and it's a big innovation because it's going to allow those quality control groups to really focus on making that process more efficient, so making it closer to a real-time batch release. We're going to build that out, do well in that area. And then we'll see how it goes in terms of potential applicability to other lab operations.

Next question is for Brent regarding our 2025 targets. It's great to hear about your progress relative to your long-term targets. How far ahead are you tracking right now? And what products have been driving that outperformance?

Yes. So we're tracking ahead to our 2025 targets of $3 billion and 35% op margin. And this is both the case in commercial as well as in R&D. So pretty broad-based growth strength that we're seeing. And again, it's broad-based across R&D and clinical as well as in the quality suite specifically. Now the commercial side, a lot of opportunities with Crossix and our data and analytics products in front of us. So truly broad-based strength that's driving the opportunity in front of us.

Great. And one question about our ongoing litigation. So what's the latest on our lawsuits? Anything we should be aware of or any developments you'd like to share?

I guess I'll take that one, Ato. In terms of our lawsuits, we have our lawsuit -- our antitrust lawsuit with IQVIA. That's progressing well. It had some COVID delays, but now it's progressing well. We expect that to go to trial in really 2023, so roughly 18 months from now, and we're confident in our case. And I think that if that gets resolved in our favor, that will be a nice long-term boost for Veeva and the industry overall. If it unfortunately gets resolved not in our favor, then it will be just life as usual for Veeva.

Great. And the next question is for Paul regarding Data Cloud. So we said that prescriber and sales data will be available in January next year. How should we think about what the revenue profile might look like for some of our larger customers?

Yes, that's right, prescriber and sales data in the early part of next year. Remember, we're in the very early phase of the market with Data Cloud with all of our data products. So we're focused on early adopters and customer success. So from a timing standpoint, the contribution for a large enterprise customer, although significant, it could be in kind of the low double digits of millions of dollars. That will take time, and we're really thinking about more meaningful contribution from Data Cloud closer to 2025.

Great. And one more for Jim on digital trials. And for our early adopter, LEO Pharmaceuticals, why did they select to partner with Veeva? Can you tell us a little bit more about the relationship between Veeva and LEO?

Sure. Two reasons on why LEO went with Veeva and why we have the partnership. One is they were already leveraging Veeva in many of the areas across development and are a very happy customer. We've delivered a lot of value together. So there was a trust there. But the other is that there was actually very good alignment in terms of where each of us is going with this concept of digital trials. LEO has got a vision for 2030 that aligns very nicely to what we're looking to do at digital trials with this connected ecosystem and driving more efficient trial execution.

Great. And a question for Paul about Link. How does the opportunity for Link fit into the broader commercial business? And like can you give us a little bit more details about how it helps drive rep efficiency?

Yes. So Link is exciting because it brings together data which we curate. We use technology, we use people to curate key data about key people, key accounts and then insights about them, and we surface that data in real time. So it's unique in what it does, and it combines software and data, which is core to our strategy. And then we surface that data where the field teams need it most. So it could be someone in medical or it can be a field rep. So what's valuable about that, it is -- it does help them be more efficient, but it also helps them, more importantly, be more effective. So these are really key people. They're the most -- some of the most important people in the industry. They may be thought leaders or scientific experts. And it surfaces that information when they're about to have a conversation with that customer or as they plan for that engagement with that key person. So it's really valuable. I would say it's more of an effectiveness play for the field teams, both medical and sales, and we're excited about it. It's a core part of what we're doing in Commercial Cloud.

Great. And another question for Jim. Can you tell us a little bit more about CDB and where that fits in within our clinical data management solution? And is this additive or is it part of that product?

Sure. So CDB is an acronym for clinical database. This is a differentiated solution for us in the clinical data space. Yes, we offer the Vault EDC. But CDB actually is part of the overall CDMS solution. CDB allows data to be ingested, not only from the collective patient data, but really from all of the necessary data you need for a trial like labs and imaging, et cetera. And then it's an environment where the customer can clean and format their data so that it ultimately can be submitted to a health authority. And so it's a big differentiator because it works alongside our EDC, which is really not what any of the incumbents do. In terms of being sold as a separate product, yes, it is a license that can be in addition to EDC or bought together.

Great. Thanks for that. And a question for Peter. As we look out towards our 2025 target of 10,000 employees, can you talk to us about how -- can you talk to us about the hiring environment and our progress against that?

Yes. Well, it's a difficult hiring environment for everybody, right? Talent -- there's, they call it, the war for talent. Talent is in higher demand right now, especially for technology-related talent, and the supply is not increasing that much. So we're tracking well. We're tracking to our plans, and I think it's helping Veeva actually. When the times get hard like this, when a company can execute better on their talent attraction, not just the number of talent, right, because that's easy to do, but the talent that really fits in with your values and is sort of surgically implanted in onboarding, then you can execute better versus, for example, a company that just rampantly gets a lot of people and throws them together. That may help them in the short term, but it hurts them in the long term. So it's hard work, but it's actually a positive. This tight market is actually a positive for Veeva.

Great. Thanks for that. And Paul, we have a question about OpenData and Crossix and the competitive environment there. So how does Veeva OpenData and Crossix solutions stack up against some of the competing offerings from Doximity?

Yes. It's very, very different. So there are different markets. Doximity is think of it as kind of the LinkedIn for doctors, social media network for doctors. That is not what OpenData and Crossix are about. OpenData is really fundamentally the health care professional and organization data that we curate and sell back to our customers, and we do that in a really efficient way for the market. So -- and our customers are very happy, and we integrate that into our software applications. Crossix, as you know, is about optimizing the spend of your media and your marketing, both to health care professionals as well as the patients and consumers. That is also very different than Crossix. So we don't compare those 2 because they're very different markets.

Great one. Paul, another question for you on Data Cloud. So if you could give us some details about how our approach is more modern and different in terms of sourcing alternative data for targeting. And yes, we'll stop there.

Yes. I mean as I mentioned earlier, it's -- we talk about it as being modern using technology. So the core part of the Crossix acquisition was to acquire the Crossix Data Platform. And the Crossix Data Platform is unique in that it allows us to really source data from a variety of different sources. We're not as reliant as some of the legacy providers on a couple of retail pharmacy chains, for example. So our breadth and our depth of the data is very different. The privacy safe aspect is controlled by technology. It's not controlled by people. So that gives us an advantage. And then also, it enables us to be more agile and move with speed. So it's fundamentally a technology advantage that we have created, which is very different than the legacy approach in the marketplace, which is it hasn't relied as much on technology and platforms.

Great. And next question is for Peter. So you've been at PBC for a little bit, coming up on a year now. Can you talk about some of the impacts and what you've seen changed in terms of the customer reaction or industry reaction?

Customer and industry reaction has been positive. Two real concrete things, helping us attract the right type of people that want to be part of our mission. It makes it clear what Veeva is all about. And so therefore, that allows people to self-select into the places that they feel good about. And then for our customers, especially large customers, Veeva, our solutions are very sticky, each one of itself. And then when they're integrated together, they're even more sticky. So if you think about customers, they're thinking, wow, this could be a 20-, 30-year commitment with Veeva realistically. And they would like and they now appreciate that legal comfort that Veeva is going to have their best interest in mind. So I really feel that it's going to be a great thing for our long term and, honestly, a great thing for society. I think it's a model where important companies should be about the employees, the customers and the shareholders. That's the way I feel and the way the Board feels, and that's the way our shareholders' felt too. So it's very nice to see them go for that.

I think we're going to take just a couple more questions. Paul, one more question for you on Link. So can you talk to us about the momentum that we've seen recently in Link and a little bit more about the pricing model for Link?

Yes. So Link is going well in the marketplace. So remember, there's a little bit of history behind Link where we focused in on the oncology therapeutic area. And earlier this year and about the mid-part of the year, we expanded to a number of therapeutic areas, which has allowed enterprise customers to really appreciate that value from oncology and extend that to other therapeutic areas. And we've seen that turn into global agreements with customers. And we announced 7, 7-figure customers in our last call. So Link is going quite well in the marketplace. And the pricing model is generally enterprise license agreement. So we -- our customers would license the kind of full data set in Link, and they can use it for all of their users. There's some more granularity in there, but that's the general approach.

Yes. I'll just chime in there. Link is interesting, and I appreciate the questions around Link, is it's quite innovative and it's new and it's a bit hard to absorb. So yes, enterprise license agreement, that's the goal. Sometimes it's going to start in a particular area. It might be a particular brand or a country or might be in the medical or the commercial and then we expand from there. And then remember about Link, it's a combined -- it's a customer intelligence platform. So it's combined software and data. The way to think about it is we have our CRM system. Maybe you might think of that as sort of like salesforce.com. And then we have Link, which is a central system that we operate. You might think of that sort of like LinkedIn. And the magic that we're doing is we're having those 2 systems work together. And that's something we've been working on for a few years, and now I feel like we've really cracked the code and now we can accelerate around the curve on that.

Great. This next question is probably for both Brent and Peter. So can you give us an update on Crossix since the acquisition? Like how is that business trending relative to your expectations?

Brent, do you want to take that one first?

Yes, happy to take that. So the Crossix acquisition has gone really well from a people perspective and the fit within the Veeva culture as well as just the overall business results. And it's been a nice contributor to our growth over the past couple of quarters, and we expect it to contribute nicely to our growth going forward as well.

Yes. And absolutely now, if you look at the thesis for the acquisition, it was relatively interesting, right? Get a company that we think is -- that has some scale and can scale further, use that core Crossix platform, morph it into an even bigger opportunity and then achieve synergies in our sales organization through cross-sell in the account. That's a lot of stuff to do, and it's going well. All 3 of those things are going well. So pretty disciplined execution. I'm really, really happy with it. Acquisitions are not so easy to pull off correctly, but we're definitely pulling this one off correctly.

All right. So a question for both Peter and Paul, it's a few questions around analytics rolled together. So one, does the legal stalemate with IQVIA need to be resolved before you really start picking up momentum in terms of analytics? And then two, could you give us a little bit of a view on Veeva's approach to analytics and what might be successful as we go forward in that marketplace? And then three, looking at customer data and analytics environment, that's a pretty fragmented industry space. And who -- against who might we be competing?

Paul, do you want to take that one?

Yes, let me take a stab here. So the first question, restate the first question. As I recall it, it was...

Does the litigation need to -- with IQVIA need to be resolved before we can really start to build momentum in analytics?

Yes. So it certainly impacts portions of our analytics business. So we've talked about IQVIA blocking our customers from our innovation in areas like Nitro, and that's real. And that has had an impact -- a negative impact on our business, and it blocks innovation from our customers being able to kind of do new and different things. So yes, that is real. But remember, that's kind of one part of our business. There's other -- when we talk about analytics, we're talking about areas like Crossix as an example, where it is an application which includes data surfaced through really rich analytics, which allows our customers to make more impactful decisions, smarter decisions, really driving significant ROI. So yes, it impacts part of our business, but it doesn't need -- fully need to be resolved for other areas. And it also has no impact on what we're doing with Data cloud. Data Cloud is separate and not impacted by that. I think you had -- maybe refresh Peter on the next question?

Yes. And the second one is that analytics is a pretty competitive environment. Can you give us some -- let us know about how Veeva is going to go to market here and really achieve success as we move forward with our analytics products.

Yes. Paul, maybe I'll take that one. It's -- yes, when people say analytics, you might hear a lot of -- you might -- a lot of things are lumped into that. What will make me this successful is probably -- is our precision approach to the solution. You noticed the OpenData, the foundational reference data, making that excellent around the globe, fitting that in with CRM, and this innovation with Link, and then also innovation with Data Cloud in the performance data and then tying that all together with Veeva ID. So interestingly enough, I view our data strategy in commercial as very similar to the strategy we laid out with Vault -- for Vault for the Development Cloud, which was in about, oh, it started being laid out in 2013. It crystallized sort of in 2016 and then we've been executing. That's what we're kind of doing in data, integrated products, each excellent, fit together, global scale and married with our software. Now there are other -- if you'd look at differentiation, there are many companies that have to get to a certain scale selling a niche product. Their company is their product. And they have to do that and so they optimize for that. And then there are many tooling companies that are great. People need tools. Snowflake and other companies, they need tools to build custom solutions for sure. But what we're offering is not that. We're offering the integrated solutions so companies can easily consume it. So it's quite differentiated. It's not something that anybody else has tried yet, and that's why we're excited about it.

Great. Thanks. And I think for our last question, Peter, just a little bit more about the history of Veeva and where we see opportunities going forward. Is that -- Veeva started in commercial and moved into clinical. Longer term, is there an opportunity for Veeva to move in the preclinical vertical?

Preclinical into the research area, I believe that's the meaning of that question. Yes, of course, there could be opportunity to do that over time. But right now, we're really focused on what we're doing. So we have no current plans to go into the research area. These areas are still early that we're in right now. And especially when you look at the data area and the digital trials area, that's more than enough to keep us busy.

Great. Right. Thanks. Back to you, Peter, for some closing remarks.

All right. Thanks, everyone, for joining us today, and thanks for your great questions. And I look forward to speaking with you again on our Q3 earnings call. Thank you.